China’s Reckoning:

The Economic Miracle Hits Troubled Times

China's Communist Party promised to transform people's lives after decades of chaos. Higher living standards underpin the party’s rule, making limits on personal freedoms worthwhile for many. As the economy slows, that social compact is fraying.

1

1949-1988

Ups and Downs

Nationalization of the economy begins. China makes big gains in industry and health. But the party makes mistakes, especially with Communist leader Mao Zedong’s radical programs to remake society. His successors, fearing China’s backwardness leaves the party’s legitimacy at risk, make the economy the priority. Limited market-oriented reforms begin and incomes rise.

Iconoclastic economist Mao Yushi, 85 years old, bears witness to the tumult of the Chinese Communist Party's first 40 years in power.

Unsteady Steps

An impoverished China looks to make strides when the Communists take control. Mao’s programs lead to setbacks before steadier policies, and the start of reforms, produce results.

Birth and death rates spike under Mao, then fall with birth controls and economic growth.

Economic growth inches ahead…

… but a large population is a challenge.

2

1989-2000

Crackdown and Reform

Questions about Communist rule in the wake of market reforms combine with concerns over rising inequality, corruption and inflation to trigger protests in Beijing’s Tiananmen Square. The crackdown hurts the economy, renewing worries about the need for growth. Deng Xiaoping reignites economic reforms. A chaotic era of high growth begins.

Changing Course

A chill hits the economy and society after the Tiananmen crackdown, until Deng puts reform back on the agenda.

Foreign investors return in force…

… and cities begin to boom.

Higher living standards lead to better health…

… but the safety net of the old command economy frays.

3

2001-2008

The World's Factory

Admission to the World Trade Organization forces China to further liberalize — and brings a windfall of investment. China becomes the world’s factory floor. Growth peaks at 13.1% in 2007. The domestic market emerges as a source of global demand. Low-cost Chinese labor helps push down import prices of consumer goods in Western nations.

The sleepy city of Yiwu in southeastern China blossoms into a wholesale mecca for the world's retailers.

Taking Off

Exports of goods soar…

… and appetites at home change.

4

2009-2012

Global Crisis and Domestic Stimulus

Massive government spending and bank lending keep the economy humming through the global financial crisis. State industry soars. Cities boom, luring more migrants. Chinese students who went abroad return. But the stimulus and easy credit contribute to corruption, pollution, irrational investment and debt, creating a drag on the economy.

Fast Track

Note: Growth is shown as an average between construction start month and a station's launch day.

Loose Change

The torrent of easy money produces a surge in infrastructure development, factory output and household consumption, until the excesses begin to show.

Easy money juices construction and consumption…

… but the environment takes a hit.

5

The Xi Jinping Era

China’s “New Normal”

Overbuilding in housing, overcapacity in industry and a big debt overhang lead to a dramatic slowdown in China’s economy. The government tries to engineer a bull market in the stock exchanges to kickstart growth, but it backfires. Protests tick up. Concerns emerge over the future of China’s social compact.

A summer of discontent in China underlines the challenges of a slowing economy.

Hangover Pains

Problems from the stimulus binge mount in the financial system, and fixes breed unexpected consequences.

Businesses load up on debt, turning to banks, shadow banks and bonds.

The yuan, once reliably stable, slips as the government loosens controls.

HOW MANY YUAN ONE U.S. DOLLAR BUYS

Note: Scale inverted to show weaker yuan.

After years of torpor, the stock markets skyrocket and then succumb to gravity.

SHANGHAI COMPOSITE INDEX

Source: WSJ Market Data Group (yuan and Shanghai Composite Index)

Sources: National Bureau of Statistics; Ministry of Industry and Information Technology; CEIC; Agriculture and Horticulture Development Board; OECD; World Bank; Wind Information Co. and New York Stock Exchange; BP Statistical Review of World Energy 2015 (callouts); Associated Press (top photos)